President Trump's comments on preferring Kevin Hassett to remain in his current role rather than becoming Fed chair, along with threats of tariffs on countries not aligning with U.S. policy on Greenland, contributed to a choppy week on Wall Street.

The U.S. military action in Venezuela has boosted oil stocks like Chevron $CVX ( ▲ 0.55% ) and Exxon Mobil $XOM ( ▲ 0.75% ) by around 5%+ year-to-date, with energy sector gains of about 7%.

Additionally, Trump's push for a $1.5 trillion defense budget in 2027 has rallied defense stocks, reflecting investor bets on increased military spending.

As we kick off the 2026 year, where the markets have become as unpredictable as a January snowstorm, I thought it would be the perfect time to dive into behavioural finance.

You can spend hours researching the PERFECT stock, but it wont matter unless you THINK about money the right way.

Habits come first, always.

This isn’t just academic fluff either, it’s the psychology behind why even seasoned investors like us sometimes make those bonehead moves.

By understanding biases, we can sidestep mistakes that erode our hard-earned gains.

In todays post, we’ll unpack these traps with real-world examples from 2025’s rollercoaster year and arm you with the tools you need to make smarter calls in a year that could present even more volatility.

Here’s your playbook to investing in 2026.

Let's start with confidence bias, that sneaky ego boost where we overestimate our knowledge or predictive powers.

It’s like thinking you’re the Wayne Gretzky of stock picking because you got a few trades right.

In your mind, this leads to feeling unstoppable.

In reality, this leads to excessive risk-taking and poor diversification.

Take 2025 for example: Investors who were surrounded by surging stocks like Nvidia, Google, and Palantir, poured a lot of their money into tech, convinced they could time the market. Many investors experienced “over-trading”, with many ignoring market volatility and racking up unnecessary fees.

Why does this happen?

Overconfidence blinds us to uncertainties, making us dismiss any and all contrary evidence.

This can become dangerous in volatile markets, where interest rates flip and geopolitical tensions spike, causing amplified losses from our bias.

For example, a biased investor may allocate funds to tech stocks with optimism, assuming the bull run will never end.

But the cost of this decision?

A concentrated portfolio that tanks when reality starts to hit…

I’m not saying that concentration is bad, I am saying that concentration as a result of overconfidence is.

How Do You Fight Back Against This?

Try maintaining a “Decision Journal”.

Yes I know it sounds ridiculous… but hear me out.

Before any of your trades, jot down your rationale, expected outcomes and confidence level on a scale of 1-10.

After a month goes by (or timeline of your choosing), review your wins and misses.

This forces you to maintain humility and allows you to take accountability when you’re wrong.

So many investor never admit when they’re wrong. They just move onto the next one without acknowledging their mistakes.

Now onto herd mentality, the pack instinct that turns rational people into followers.

This bias drives us to follow the crowd, often leading to buying high and selling low out of FOMO.

It was apparent in 2020-21, when social media’s hype propelled GameStop $GME ( ▼ 1.22% ) into the stratosphere.

Many retail investors decided to hop on the train, but most lost money because by the time you hear about a stock popping off, it’s usually too late to get in.

And a situation like this inflates the stock beyond its fundamentals, only to follow by crashes.

A fresher example?

The herd piled their capital into AI-related equities amid the Gemini and GPT-5 buzz, with everyone copying big players like Berkshire Hathaway's cloud bets.

But as OpenAI underwhelmed, the stampede of capital inflow reversed, triggering panic sells.

Herding thrives in volatility because uncertainty pushes us toward perceived safety in numbers.

At the same time, it creates asset bubbles.

Fight back with this tip: Practice "contrarian questioning."

When a stock or sector trends are hot (ex: via X feeds or news), list 3 reasons why the crowd might be wrong.

If you’re dividend-focused, ask: Is this yield sustainable, or just hype?

If you’re growth-focused, ask: do the fundamentals justify the current price?

These are questions my premium subscribers are asking themselves, along with other boxes to check off before they pour their money into any asset.

If you want to join us, upgrade here.

Biases like confirmation (seeking only agreeing info) compound issues as well.

In 2026, with potential recessions looming, mastering this is key.

Behavioral finance isn't about perfection, it's about awareness.

By spotting overconfidence or herd pulls into trendy trades, you'll navigate volatility like a pro.

Until next time!

Alex (The Dividend Dominator)
Founder and CEO of Dividend Domination Inc.
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